Independent-contractor1Have you heard about the Payroll Fraud Prevention Act of 2015?  More importantly, do you know its implications on your business?

The bill was introduced on the heels of the U.S. Department of Labor’s interpretation warning that “most workers are employees,” and it basically expounds upon the Fair Labor Standards Act, imposing several requirements on employers.

In addition to defining who is considered a “non-employee,” the bill would also require employers to provide all employees with a written notice of their classification as either an employee or a non-employee.  The written notice would also need to include the following statement:

“Your rights to wage, hour, and other labor protections depend upon your proper classification as an employee or a non-employee. If you have any questions or concerns about how you have been classified or suspect that you may have been misclassified, contact the U.S. Department of Labor.”

Failure to provide this notice to any worker automatically would qualify that individual as an employee, unless there was quite compelling evidence to the contrary.

Stiff penalties and consequences would apply for employers who violate or fail to comply with the requirement.  They would be prevented from retaliating against an individual who does pursue their rights under the act.  They could also face up to $1,100 in penalties for each misclassification ($5,000 if it’s deemed to be willful or happens repeatedly).  Industries with a high rate of misclassifications might also be subjected to an audit.

Due to the current Congressional divide, the bill is likely to be passed terribly soon.  But portions of it are beginning to appear in other contexts.

One example is the proposed Fair Pay and Safe Workplaces Executive Order (a.k.a. the “blacklisting” rule), which would impose paycheck reporting requirements for federal contractor employers with contracts totaling over $500,000.   There’s also an increased push for a “Right-to-Know” rule, which would keep employees abreast of their status as an employee or independent contractor and how their pay is calculated.



For more information on this and other pending legislation, you can check out this article from TLNT via ERE Media.